Report | June 17, 2016

Contract Awards at Naval Oceanographic Office Need Improvement

DODIG-2016-100

Objective

We determined whether the Naval Oceanographic Office (NAVOCEANO) properly awarded contracts for scientific equipment, software, and technical support. We reviewed a nonstatistical sample of 25 contracts, valued at $15.5 million.

Findings

NAVOCEANO contracting officials generally competed contracts or supported sole‑source justifications for 22 contracts, valued at $13 million.

However, NAVOCEANO contracting officials awarded two sole-source task orders, valued at $2.2 million, under two multiple-award contracts without citing an exception to the fair opportunity rules, which require that each awardee be given a fair opportunity to be considered for each order. The NAVOCEANO contract specialist who assisted the contracting officer stated this occurred because she had never worked on awarding a multiple-award contract before and was not aware of fair opportunity requirements. In addition, NAVOCEANO contracting office management had not established procedures for awarding task orders under multiple‑award contracts.

As a result, the Navy may not have received cost savings through competition on the task orders. In addition, NAVOCEANO contracting officials awarded one purchase order, valued at $310,660, after advertising the solicitation for only 6 days and receiving one bid, which violated the Defense Procurement and Acquisition Policy Memorandum, “Improving Competition in Defense Procurements,” November 24, 2010.

NAVOCEANO contracting officials adequately supported price reasonableness determinations for 8 contracts, valued at $5.9 million, of 25 contracts, valued at $15.5 million. However, NAVOCEANO contracting officials did not support price reasonableness determinations for 17 contracts, valued at $9.6 million. Specifically, NAVOCEANO contracting officials:

  • could not locate price reasonableness determinations for four contracts, valued at $1.8 million;
  • used invalid comparisons to prior contracts for four contracts, valued at $4.1 million; and
  • relied on unsupported independent Government estimates for nine contracts, valued at $3.7 million.

This occurred because former NAVOCEANO contracting office management provided standard operating procedures with inadequate guidance on performing and documenting price reasonableness determinations, no guidance on preparing and approving independent Government estimates, and a reference to a section of the Federal Acquisition Regulation that no longer existed. In addition, NAVOCEANO scientific staff and contracting officials did not receive adequate training on their responsibilities for developing, reviewing, and approving independent Government estimates. Also, the Chief of Contracts, NAVOCEANO, stated that the NAVOCEANO contracting office experienced high employee turnover, resulting in understaffing. As a result, NAVOCEANO customers may have paid more than they should have for supplies and services.

Recommendations

We recommend that the Chief of Contracts, NAVOCEANO, develop and implement procedures for awarding task orders under multiple-award contracts; train contracting personnel on awarding multiple-award contracts and task orders; update standard operating procedures to provide guidance on documentation needed to support price reasonableness determinations, including independent Government estimates; train scientific staff and contracting officials on their responsibilities for developing, reviewing, and approving independent Government estimates; and train contracting officials to award contracts both under and over the simplified acquisition threshold.

Management Comments and Our Response

The Commanding Officer, NAVOCEANO, comments addressed all specifics of the recommendations to train contracting personnel on awarding multiple-award contracts and task orders, train scientific staff and contracting officials on their responsibilities for developing, reviewing, and approving independent Government estimates, and on awarding contracts both under and over the simplified acquisition threshold. Therefore, we are not requesting additional comments for those recommendations.

However, comments from the Commanding Officer, NAVOCEANO, did not address all the specifics of the recommendations to develop and implement procedures for awarding task orders under multiple-award contracts and update standard operating procedures to provide guidance on documentation needed to support price reasonableness determinations, including independent Government estimates. We request additional comments for these recommendations by July 18, 2016.  

This report is a result of Project No. D2016-D000CF-0007.000.